Cash is King – For Now

A little comment cleaner for you rats. Let’s take a quick stroll through Ron Paul’s D.C. office:

Of course very little is obvious in life and when it comes to trading or managing one’s finances what appears ‘obvious’ is often ‘obviously wrong’. For the foreseeable future exactly the opposite of what Ron worries about is actually occurring and cash will remain king. So expect the ole’ back to keep climbing he charts in the coming months.

How is that possible when the Feds are printing money like there’s no tomorrow?

Because the implosion of our credit markets can be visualized as a slowly contracting balloon of over $50 trillion. This massive amount of debt is thwarting any of our Fed’s attempts to re-inflate the economy. Even the $2 trillion basically printed out of thin air is nothing more than the proverbial drop on the hot stone and simply won’t get ‘the job done’. Even worse – it only delays the inevitable by producing more debt on top of the existing bubble. Kind of like trying to put out a fire by pouring gasoline on it. We’d actually be better off if we would let things run its course – after all that’s free market economics, right? The Feds continued attempts to do away with much needed market contractions actually got us here in the first place.

So, are Ron’s concerns unsubstantiated? Absolutely not – he will be right eventually – a year or two down the line, once income generated by domestic economic production will once again be able to sustain outstanding credit market debt. At that point all the Fed’s meddling will quickly catch up with us and the ole’ buck will suddenly fall off the plate. It won’t be pretty – I can assure you that. However, I don’t think that will happen before 2010 and I expect all of us to be knee deep in Gold way before this happens.

As with everything in life, timing is everything. Until the excrement really hits the fain the real cash that remains (not debt) will keep gaining in value, which is why you see the Dollar rallying as of late. For now, hold on to as much of your Dollar denominated cash as you can. Cash is king, baby!